S & U: FY 2025 Profit Down 29% Leaves Shares At 0.95x NAV To Offer Possible 10-15% CAGR Supported By ‘Minimal’ Exposure To Regulatory Redress, Post-FY ‘Above Budget’ Lending And An ‘Expected Resurgence In Profitability’

02 September 2025
By Maynard Paton

FY 2025 results summary for S & U (SUS):

  • An FY performance blighted by ongoing regulatory matters and an adverse Court of Appeal judgment, with FY motor-finance lending down 38% that prompted FY profit to drop 29% and led to yet another dividend cut.
  • Collection rates, up-to-date accounts and Stage 3 impairments within the motor-finance division all moved significantly in the wrong direction, but could soon recover following a shift towards lower-risk borrowers alongside a favourable Supreme Court ruling.
  • Indeed, SUS’s exposure to substantial regulatory redress now appears “minimal” while post-FY statements talked of an “expected resurgence in profitability” through “above budget” motor-finance lending on what has become a “level competitive playing field“.
  • The property-bridging subsidiary meanwhile delivered “excellent” progress, with record lending at higher rates leading to FY profit surging 50%, a possible 65% pre-tax return on equity and divisional loans supporting 35% of the group’s loan book.
  • The shares yield 5%-plus and are valued at 0.95x NAV, and may offer a 10-15% CAGR should the payout be maintained and future NAV growth eventually persuade the market cap to once again trade above book. I continue to hold. 

Contents

News links, share data and disclosure

  • Share price: 1,860p
  • Share count: 12,150,760
  • Market capitalisation: £226m

Why I own SUS

  • Provides ‘non-prime’ credit to used-car buyers and property developers, where disciplined lending and reliable service have supported an illustrious NAV and dividend record.
  • Boasts veteran family management with a 40-year-plus tenure, 52%/£118m shareholding and a “steady, sustainable” and organic approach to long-term expansion.
  • Adverse regulatory and legal developments within the motor-finance sector have depressed the market cap to below net asset value, which should offer upside potential as industry-wide problems recede and greater market share is captured.

Further reading: My SUS Buy report | All my SUS posts | SUS website

Results summary

Revenue, profit, net asset value and dividend

  • December’s RNS referred to “chaotic market conditions produced by the Court of Appeal decision“, with SUS’s motor-finance subsidiary witnessing new loans decline by a third:

[RNS December 2024] “However, the chaotic market conditions produced by the Court of Appeal decision which caused some lenders to pause lending altogether, contributed to a year-to-date fall in advances at Advantage at the end of the period of 33% on last year.” 

  • During H2, the Court of Appeal deemed commissions paid by motor-finance lenders to car dealers as ‘bribes’ unless the commissions were disclosed clearly to the car buyer. The ruling gave rise to lenders potentially incurring substantial claims to repay such ‘secret’ commissions (see Advantage Finance: Supreme Court judgment).
  • December’s RNS also referred to “lower repayment trends” leading to motor-finance profit being cut by approximately 50%: 

[RNS December 2024]  “As a result of the continuation of the lower repayment trends mentioned in our half year results and the lower receivables, Advantage profit before tax for the period continued at around half the level of the same period last year.”

  • The “lower repayment trends” reflected SUS adhering to the FCA’s ‘forbearance’ rules, Consumer Duty regime and section 166 notice, the latter in particular causing restrictions on motor-finance collections and creating greater loan impairments (see Advantage Finance: BiFD, Consumer Duty and Skilled Person).
  • February’s RNS reiterated the “continuing headwinds” that would dampen H2 2025 motor-finance profit:   

[RNS February 2025] “The continuing headwinds at Advantage will be reflected in its profits for the second half year (Jul 24 – Jan 25) but as a result of the improving trends mentioned above in advances and collection rates, we anticipate a recovery in profitability during the next financial year.“

  • Better H2 2025 news was delivered during December and February about SUS’s property-loan division. 
  • Both December’s RNS…

[RNS December 2024] “Aspen Finance, S&U’s dynamic property lender which trades in the unregulated sector continues to prosper. Despite a slightly subdued residential property market, it is encouraging that bridging lending nationally has increased by 7.6% in the year to date to £9bn. Aspen has surpassed this with advances increasing by 23% on last year to £148m. Net receivables at the end of the period were up 30% at £154m and profit before tax for the period was approximately 50% ahead of the same period last year.“

  • …and February’s RNS…

[RNS February 2025] “An even more positive picture for the future can be painted for Aspen, S&U’s property finance lender. Aspen has enjoyed a record year on net receivables up c.17% on last year at c.£152m (2024: £130m). Collections are up 25% at £157m. Moreover, profits are likely to rise by a remarkable 50% on last year, testament to improving yield and transaction volumes alongside sensible cost control.“

  • …indicated this FY’s property-finance profit would advance by 50%.
  • This FY’s motor-finance profit meanwhile dived 43% from £28.8m to £16.5m, with H2 motor-finance profit sliding 26% from £9.8m to £7.2m:
  • The H2 motor-finance profit appeared somewhat better than December and February’s RNSs had implied. Excluding “exceptional potential customer remediation costs” of £2.7m (see Advantage Finance: regulatory redress), H2 motor-finance profit would have in fact been maintained at almost £10m.
  • SUS’s total pre-tax profit (including the exceptional cost) fell 29% from £33.6m to £24.0m:
  • Total H2 pre-tax profit (including the exceptional cost) declined 9% to £11.1m, the lowest H2 pre-tax profit since H2 2016 (£10.7m):
  • The regulatory upheaval within the motor-finance division led to total FY loan impairments surging 47% to £35.7m and absorbing 31% of FY revenue (see Advantage Finance: impairments):
  • At least total H2 loan impairments at £16.7m were less than both the £18.9m recorded during the preceding H1 and the £17.0m recorded during the comparable H2: 
  • Alongside the greater loan impairments, FY net finance costs increased 20% to £18.1m to absorb 16% of FY revenue (see Financials: cash flow and debt): 
  • Note that net H2 finance costs at £8.5m were £1.1m less than the £9.6m recorded for the preceding H1:
  • This FY’s lower profit was declared despite FY revenue inching £0.2m higher to £115.6m to set a new FY record:
  • The record FY revenue was due entirely to H1 revenue gaining 9% to £60.4m; H2 revenue declined 8% to £55.3m.
  • SUS’s revenue reflects the interest paid by customers on their loans, and revenue movements can be dictated by changes to:
    • The size of the overall loan book;
    • The interest rates applied to new loans, and;
    • The proportion of borrowers actually paying the interest they owe.
  • The total FY net loan book declined 6% to £436m, which in turn allowed FY debt to shrink by £26m to £198m (see Financials: cash flow and debt). 
  • Reflecting greater motor-finance lending caution during H2, the total net loan book finished this FY 8%/£40m below the £475m recorded for H1.
  • This FY’s £24.0m pre-tax profit converted into earnings of £17.9m, which after dividends paid during the year of £14.0m left SUS’s net asset value (NAV) £3.9m higher at £238m — equivalent to £19.59 per share and a fresh NAV record:
  • This FY’s £238m NAV exceeds the recent £226m market cap (see Valuation).
  • This FY extended SUS’s run of unfortunate dividend news.
  • After:
    • The H2 2024 interim dividend was cut by 3p to 35p per share;
    • The FY 2024 final dividend was cut by 10p to 50p per share;
    • The H1 2025 dividend was cut by 5p to 30p per share, and;
    • The H2 2025 interim dividend was cut by 5p to 30p per share…
  • …this FY announced the final dividend would be, “under the circumstances“, cut by 10p to 40p per share. 
  • This FY’s total payout therefore amounted to 100p per share versus 120p per share for the comparable FY and the record 133p per share for FY 2023:
  • Prior to the pandemic, SUS had not reduced its annual dividend since 1987:
  • Earnings cover for this FY was 1.47x:
  • SUS had targeted 2x cover prior to the pandemic:

[FY 2017] “Whilst rewarding shareholders for the Group’s continued success it also secures a slight improvement in dividend cover, with the aim of achieving two times cover in the near future.” 

  • Future dividend growth may therefore lag future earnings growth should SUS wish to reinstate that 2x cover target.
  • Statements published after this FY imply earnings may indeed recover during FY 2026 (see H1 2026 trading updates):

[RNS June 2025] “Overall, Group profitability is trending to be ahead of 2024 at half year and accelerating from there.“

[RNS August 2025] “As a result, the expected resurgence in profitability for the Group is beginning to materialise and is expected to gain momentum in the second half of the year.” 

Advantage Finance: competitive position

  • Advantage Finance was established by SUS during 1999 and provides buyers of used cars with hire-purchase loans of between £2k and £20k.
  • This FY outlined how Advantage’s customers typically possess imperfect credit scores:

“This long experience has enabled Advantage to gain a significant understanding of the kind of simple hire purchase motor finance suitable for customers in lower and middle-income groups. Although decent, hardworking and well intentioned, some of these customers may have impaired credit records, which have seen them in the past unable to access rigid and inflexible “mainstream” finance products. Advantage provides transparency, simplicity, clarity and suitability to both service and product, which these customers require.” 

  • Customers are acquired through finance brokers and car dealers, and often receive their loans on the day of their application and do not need to provide a deposit.
  • Advantage cites a representative APR of 33.87%:
  • The representative example indicates borrowing £8.0k at a flat 17% a year over 54 months and paying interest of £6.1k and a total sum of £14.6k that includes a £325 acceptance fee and a £200 vehicle-purchase fee.
  • Advantage has typically issued 20k-25k loans a year, equating to a market share of less than 2%:
  • The number of loans Advantage issues can fluctuate due to the subsidiary’s very cautious approach to lending when faced with unpredictable events. In particular, FY 2021 witnessed fewer loans issued because of the pandemic while this FY witnessed fewer loans issued due to regulatory matters (see Advantage Finance: BiFD, Consumer Duty and Skilled Person).
  • Greater loan volumes and a higher market share are not always indicative of successful lending. What ultimately counts is the quality of the underwriting and how much of every loan is actually paid back. 
  • This FY claimed Advantage’s underwriting was “state of the art”…

“The Group is very proud of its excellent underwriting and fraud deterrence processes which it continues to develop. Advantage’s underwriting capability, already state of the art in the motor finance industry, has been further refined during the year to give an even more comprehensive overview of customer circumstances, affordability and their income and expenditure.” 

  • …and was assisted by 25 years of lending data:

“Advantage’s second strength is its experienced, sensitive and sophisticated underwriting. 

Backed by ever more historical information; Advantage uses this forensically to analyse the likely circumstances of actual and potential customers.” 

[FY 2023] “But we are still in a position where we have got 160-170k applicants that are still in the marketplace and we are writing between 20-25k of those, and that shows the competitive nature of the marketplace. We would like to do more of those [160-170k applicants], but at the same time we would like to achieve the margins we have currently got… I think we have got the right balance.”

  • With the overall number of used-car loans stable, industry growth has been dependent on rising used-car prices — which in turn leads to larger loans,  larger repayments and possibly larger profits. SUS has previously claimed the average used-car price nearly doubled between 2011 and 2022:

[FY 2023] “Indeed the average price of a used car has risen from £9,000 in 2011 to £17,600 in 2022. “

  • Advantage’s average loan has in turn advanced from £5.0k to £8.6k between FY 2012 and this FY:

Advantage Finance: BiFD, Consumer Duty and Skilled Person

  • Recent years have witnessed Advantage and the wider motor-finance sector attract greater regulatory attention.
  • This FY noted the “further upsurge in regulatory activity by the FCA” at Advantage:

“This year has seen a further upsurge in regulatory activity by the FCA with continuing inquiries into Advantage as well as, we understand, into the majority of firms in the specialist motor lending industry. [An] FCA inquiry focusing on affordability, forbearance and vulnerable customers and borrowers in financial difficulty has been initiated by the FCA across the industry to ease the perceived burden of a prolonged period of cost-of-living increases.“

  • The FCA’s investigations into “affordability, forbearance and vulnerable customers” commenced with its Tailored Support Guidance (TSG), which addressed how lenders should handle borrowers suffering payment difficulties caused by the pandemic.
  • An FCA follow-up to the BiFD project then proposed various “forbearance” changes as “consumers…faced increased financial challenges due to the rising cost of living“.

[FCA PS24/2] “Principle 12 (a firm must act to deliver good outcomes for retail customers), including PRIN 2A “

  • The FCA states Consumer Duty “sets higher and clearer standards of consumer protection across financial services and requires firms to put their customers’ needs first.”

[FCA March 2025]
“Monitor and regularly review the outcomes their customers are experiencing.

Identify where customers or groups of customers are not getting good outcomes and understand why.

Have processes in place to adapt and change products and services, or policies and practices, to address any risks or issues identified and stop them occurring in the future.” 

  • In addition, to ensure customers in “vulnerable circumstances” receive “outcomes as good as those for other customers“, lenders such as Advantage should:  

[FCA March 2025]
“Implement appropriate processes to evaluate where they have not met the needs of customers in vulnerable circumstances, so that they can make improvements.  

Produce and regularly review relevant management information on the outcomes they are delivering for customers in vulnerable circumstances.  

Ensure that firms they work with treat customers in vulnerable circumstances fairly, particularly where they rely on third party providers and outsourcers, through ongoing due diligence.”

  • This FY referred to further Consumer Duty work undertaken during the year:

“Advantage responsibly embraced the new Consumer Duty last year and this year have done further work with the regulator to clarify it and to make it effective in practice.“

  • This FY also referred to a “section 166 process… with a regulatory Skilled Person“:

“As part of a section 166 process, Advantage has also done significant work on customer relations and debt quality as part of a review with a regulatory Skilled Person focussed on forbearance and affordability. This review ran alongside similar reviews for many other lenders in our sector and the conclusion of this review should bring renewed certainty and focus to our motor finance business.”

  • A section 166 notice is issued by the FCA and instructs a regulated firm to appoint a ‘Skilled Person’ to evaluate the firm’s activities. The Skilled Person then reports back to the regulator.
  • SUS confirmed during the comparable FY that Advantage had appointed a Skilled Person to help implement BiFD and Consumer Duty:

[RNS December 2023] “Following the FCA’s special focus on Borrowers in Financial Difficulty (BiFD) in non-prime motor finance, the “review of Advantage’s, collecting processes, procedures and policies” we noted at half year, has developed into a more formal interaction with the FCA.

Along with many other lenders in our market segment, Advantage has appointed a Skilled Person. They are tasked, where necessary, to advise and guide Advantage in delivering, these regulatory requirements.

  • SUS warned several times throughout this FY about the adverse trading consequence of implementing BiFD and Consumer Duty.
  • In particular, a “significant impact on repayments and profitability“ was acknowledged during June 2024:

[RNS June 2024] “At Advantage, our cautious approach to repayments in the light of continuing discussions with the FCA and Skilled Person on interpreting and adapting to the new Consumer Duty regime and the sector wide review of Borrowers in Financial Difficulty, have had a significant impact on repayments and profitability. We anticipate that these discussions will be concluded during the second half of the year, when we will welcome the new regulatory clarity which will provide a strong platform for the continuing growth of the business.”

  • SUS then talked of a “period of restrictions” arising from the section 166:

[RNS August 2024] “In the motor finance sector, however, Advantage Finance, which has just celebrated an excellent 25 years in business, continues its period of consolidation and retrenchment. This has resulted from a period of restrictions and caution arising from a Financial Conduct Authority (“FCA”) section 166 notice and the constructive but vigorous negotiations taking place to remove the restrictions, which are now nearing their conclusion. These negotiations will determine a second contrast between a significant impact on Advantage’s profitability in the first half (primarily resulting from restrictions on its collections capabilities)”.

  • This FY revealed the impact of Advantage interpreting and adopting the new BiFD and Consumer Duty rules through the section 166 process. Transaction numbers slumped…

“A cost-of-living forbearance review by the FCA in late 2023 placed new restrictions on affordability and led to a significant fall in loan approvals and then transactions. Thus, the beginning of 2024 saw 5,153 new deal transactions in the first quarter, whilst new deal transactions were only 1,992 in the fourth quarter“

  • …an “overly cautious” approach to underwriting did not find favour with brokers…

“In addition, new regulatory interpretations led Advantage to an understandably but perhaps overly cautious approach to underwriting. In the apparent absence of a uniform approach to this throughout the industry, this led to some loss of credibility for Advantage with introducers.” 

  • …while repayments seemingly became optional for borrowers who did not feel like repaying and who could not to be told about repossessions:

“A good customer outcome for non-prime borrowers has always required an understanding but focused management of their repayments, using forbearance where necessary. Unfortunately, evolving regulatory interpretations at times gave precedence to often subjective feelings of customer well-being over their contractual obligations and ability to continue to access credit.

This led to an understandable loss of focus in Advantage’s collections department, which was exacerbated by the imposition in 2023 of voluntary regulatory restrictions by the FCA which curtailed any repossession activity, and even the mention of it to customers in arrears.”

  • This FY noted the steps taken to meet the new regulations:

“This year alone, Advantage has revised its scorecard, it’s affordability calculations and introduced new telephony for more efficient and consistent customer relations. It has also overhauled training for customer agents and boosted their headcount.“

  • A statement during October thankfully announced the FCA had lifted its restrictions to Advantage’s collection processes:

[RNS October 2024] “S&U, the specialist motor and property financier, today announces that the collection process restrictions for Advantage Finance Limited,  S&U’s motor finance subsidiary, have now been successfully lifted with the agreement of the Financial Conduct Authority (FCA).” 

  • And this FY confirmed the section 166 process was completed after this FY:

“The voluntary regulatory restriction was lifted in October 2024 and the regulatory S166 engagement completed in April 2025. We therefore anticipate that the understandable loss of some business focus during a challenging year will gradually be regained, of which there are early signs of such gradual improvement at the start of the new financial year.”

  • The lifted restrictions should mean progress with transactions, brokers and collections will recover during FY 2026: This FY stated:

“Currently, customer transactions have rebounded to above-budget levels and continue to improve.
…
“This credibility [with brokers] is now being restored and has prompted a shift to lower risk, higher tier customers who now comprise 70% of new deals compared to 48% a year ago.”
…
“Fortunately, such oversteer is now being corrected as collection teams combine a refined approach to customer forbearance with more habitual forms of responsible collecting.”

  • Mind you, this FY did not promise an immediate Advantage-profit recovery:

“Obviously, given the challenges of the last year, much remains to be done at Advantage to restore normal levels of profitability.” 

  • Nonetheless, statements published after this FY provided positive omens through an “above budget” Advantage performance (see H1 2026 trading updates).

Advantage Finance: regulatory redress 

  • This FY revealed the section 166 process concluded with SUS identifying motor-finance customer “remediation” costs of £2.7m:

“During the year and after discussions with the regulator and skilled person, Advantage identified some customers who were adversely affected by its historic forbearance practices and have provided for total remediation and support costs of £2.7m as an exceptional item in this year’s accounts.”

  • The FY webinar disclosed the £2.7m remediation bill consisted of £2.3m to be paid to the “adversely affected” borrowers and £0.4m of other expenses.
  • The FY webinar did not reveal how many motor-finance customers would receive part of that £2.3m, suffice to say only a “minority” were found to have been “adversely affected”.

“This year has also seen an increase in the number of complaints to Advantage reaching the Financial Ombudsman Service at 1,144 versus 732 last year, with most of the increase relating to the activities of claims firms and claims lawyers targeting Advantage with meritless commission and affordability themed complaints. 

  • I am not sure how the 1,144 Advantage complaints cited within the FY text correlates with the 316 complaints shown within the preceding H1 slides…
  • …and the 454 H2 complaints shown within this FY’s slides: 
  • Of those 40 complaints, just eight were upheld by the FOS and of those eight, six concerned the quality of the car while two concerned “irresponsible” lending (here and here).
  • For the subsequent H1 2026, the FOS website lists 23 complaints involving Advantage being decided by an ombudsman. Six complaints — all concerning poor car quality — were upheld.
  • Advantage’s website suggests almost 4,000 complaints were received during H2:
  • The main cause of complaints during H2 was “Motor Commission” versus “Underwriting” for the preceding H1 and the comparable FY. 

“Please note that Advantage Finance have never used discretionary commission arrangements and so there is no contingent liability or provision recorded for the FCA review into historic discretionary commissions as paid by some lenders in the motor finance sector.“

  • Indeed, SUS’s auditor double-checked for DCAs as a key audit matter for this FY. The auditor concluded: 

“Our observations
Based on the procedures performed and evidence obtained, we did not identify any instances of discretionary commission arrangements and found the recognition of a contingent liability in relation to the motor finance commission matter to be appropriate. We concluded that management’s measurement of this contingent liability is reasonable and that the appropriate disclosures have been made.” 

Advantage Finance: Supreme Court judgment

  • This FY referred to the Court of Appeal’s judgment and the Supreme Court’s hearing of three cases involving the disclosure of motor-finance commissions:

“The Court of Appeal decision currently being reviewed by the Supreme Court is a clear example, going over and above regulatory guidance from the Financial Conduct Authority on the way in which commissions paid to intermediaries did not have to be specifically disclosed.” 

  • To recap, the three cases concerned three individual borrowers who the Court of Appeal described as “financially unsophisticated consumers on relatively low incomes“:
  1. Miss Hopcraft, a student nurse, who purchased a car during 2014 for £8,530, of which £8,280 was through finance. The lender, Close Brothers, paid the car dealer commission of £183.
  1. Mr Wrench, a postman, who purchased two cars, one during 2015 and the other during 2017, for a total £18,745, of which £14,745 was though finance. The lender, MotoNovo, paid the car dealers total commission of £589.
  1. Mr Johnson, a factory supervisor, who purchased a car during 2017 for £6,499, of which £6,399 was through finance. The lender, MotoNovo, paid the car dealer commission of £1,650.
  • All three borrowers:
    • Believed car dealers profited only from selling cars and were unaware their particular car dealers received commissions from lenders;
    • Argued their car dealers owed them a “duty to provide information, advice or recommendation” about motor finance on an “impartial or disinterested basis“;
    • Equated the ‘secret’ commissions paid to their car dealers as ‘bribes’, and sought the return of such payments from the lenders.
  • During H2, the Court of Appeal determined the car dealers involved:
    • “Were undoubtedly acting as credit brokers” as defined by the FCA’s rules;
    • Either never declared they could receive a commission from a lender, or effectively “buried in the small print” any declaration of a possible commission from a lender, and;
    • Undertook “two separate commercial roles” when selling the cars in question:
      • The first to agree a price for the car with the purchaser, and;
      • The second to sell the car to the lender through a finance agreement.
  • The Court of Appeal’s summary deemed the two lenders liable as “primary wrongdoers” or “accessories for procuring the brokers’ breach of fiduciary duty”:

[Court of Appeal October 2024]
“For the reasons set out in this judgment, we allow all three appeals.
…
On the facts, there was no disclosure in Hopcraft and, we find, insufficient disclosure in Wrench to negate secrecy. The payment of the commission in those cases was secret, and the lenders were therefore liable as primary wrongdoers. In the light of the concession which was made below, we must treat the situation in Johnson as similar to that in Hurstanger, where there was sufficient disclosure to negate secrecy, but insufficient disclosure to procure the consumer’s fully informed consent to the payment. We find that the lenders in Johnson are liable as accessories for procuring the brokers’ breach of fiduciary duty by making the commission payment to them in the circumstances in which they did.” 

  • The Court of Appeal made clear the basic remedy to the three cases:

[Court of Appeal October 2024]
“Is the lender liable for the repayment of the commission? Answer: yes.“

  • FCA rules had allowed lenders such as Advantage not to explicitly disclose to customers the amount of commission payable to car dealers, and the Court of Appeal’s judgment effectively declared such ‘secret’ commissions to be unlawful…
  • …and Advantage had therefore become liable to repay such ‘secret’ commissions back to its customers. 
  • The Court of Appeal notably admitted its “analysis” amounted only to “sufficient guidance” for County Court judges and suggested the “definitive pronouncement” on the subject could be made by the Supreme Court:

[Court of Appeal October 2024] “We hope that our analysis will provide sufficient guidance for the County Court judges who have to deal with these types of claim on a virtually daily basis, but it may be that on some future occasion it will be felt desirable for the Hurstanger and Wood lines of authority to be considered in greater depth, and for a definitive pronouncement to be made by the Supreme Court about the circumstances in which the payment of a commission by a third party to another person’s agent or fiduciary will give rise to a liability (whether as principal wrongdoer or an accessory) on the part of the payer.“

  • The Supreme Court heard the three cases during April and this FY predicted a favourable judgment and “minimal” redress:

“The facts surrounding the three cases recently considered by the Supreme Court, and Advantage Finance’s established commissions process, differ significantly. It is generally accepted that the fixed fee commission model operated by Advantage avoids consumer harm. My own common-sensical view therefore predicts that any customer redress exposure following the Supreme Court judgement will be minimal.“

[Supreme Court August 2025]
“The transactions under review in the present cases had typical features. Each party to each tripartite transaction (customer, dealer and lender) was engaged at arm’s length from the other participants in the pursuit of separate objectives. Neither the parties themselves nor any onlooker could reasonably think that any participant was doing anything other than considering their own interest. Furthermore, the dealer was not providing credit brokerage as a distinct and separate service from the sale transaction. At no point did the dealer give any kind of express undertaking or assurance to the customer that in finding a suitable credit deal it was putting aside its own commercial interest as seller. The dealer was not an agent for the customer in the negotiation of the finance package with the lender. The dealer was undertaking an intermediary activity and did not have the authority to enter into legal relations on the customer’s behalf.“

  • …and therefore ruled the car dealers did not have a “fiduciary duty” towards the borrower…

[Supreme Court August 2025]
“The Court holds that these typical features of the transactions under review do not give rise to a fiduciary duty sufficient to create liability for bribery either under the common law tort or pursuant to the principles of equity. They are incompatible with the recognition of any obligation of single-minded or selfless loyalty by the dealer to the customer when sourcing and recommending a suitable credit package. An offer to find the best deal is not the same as an offer to act altruistically. A finance package on acceptable terms was always going to be an integral part of what had to be negotiated to bring the transaction to fruition, and no reasonable onlooker would think that, by offering to find a suitable finance package, the dealer was thereby giving up, rather than continuing to pursue, its own commercial objective of securing a profitable sale. Nor is the role of the dealer in selecting and negotiating a suitable finance package for the customer one in relation to which a fiduciary obligation of loyalty can be implied in law or in fact. Any element of trust and confidence that the dealer will secure the best available finance package is not of the type where the customer trusts the dealer to act with single-minded loyalty towards the customer, to the exclusion of its own interests. The claims in both equity and the tort of bribery therefore fail“.

  • …and therefore could not be ‘bribed’ by the lenders. 
  • However, the Supreme Court’s judgment did find in favour of Mr Johnson due to the “unfair” commission he paid:

[Supreme Court August 2025]
“The Court considers there are three further relevant factors on the facts of Mr Johnson’s case. First, the size of the commission paid by FirstRand (the lender) to the dealer was significant, amounting to 25% of the advance of credit and 55% of the total charge for credit (comprising interest and fees)…

For these reasons, the Court holds that the relationship between Mr Johnson and FirstRand was unfair within section 140A of the CCA and the commission should be paid to Mr Johnson“

  • The Supreme Court did not define exactly what an “unfair” commission was.
  • But the Supreme Court did compare the commission Mr Johnson was charged to the size of his loan (26%), the interest and fees he would pay (55%) and the total amount he would repay (18%):

[Supreme Court August 2025]
“The commission paid by FirstRand to The Trade Centre Wales was £1,650.95. This must be compared with the total amount payable by Mr Johnson under the credit agreement of £9,422.20 (17.5%), the advance of credit of £6,399 (26%), the total charge for credit (comprising interest and fees) of £3,023.20 (55%) and the interest payments alone of £2,635.20 (63%).” 

  • Following the Supreme Court’s judgment, the FCA announced a consultation “on an industry-wide scheme to compensate motor finance customers who were treated unfairly“.
  • The consultation will, among other matters, determine what exactly an “unfair” commission is: 

[FCA August 2025]
“The Supreme Court found that a high and undisclosed commission – in this case 55% of the total cost of the credit – was ‘a powerful indication’ of an unfair relationship. The court also found that this was a breach of our rules, as disclosure of so high a commission would have had a ‘material impact’ on the customer’s decision. We will, therefore, need to consider what size of commission in the context of the overall finance arrangements may point towards unfairness if not disclosed.“

[Advantage Finance August 2025]
“Advantage Finance can confirm that, where a commission has been paid,it has been on a flat-fee basis which is a form of non-discretionary commission arrangement. Flat-fee commission is where the same amount is paid regardless of the size/term of the loan. In the case of Advantage Finance Ltd, this does not affect the interest rate paid by the customer.“

  • Advantage has never disclosed the exact amounts paid as commission. 
  • But SUS does reveal its average cost of sales per motor loan, which includes broker commissions:
  • The comprable FY’s webinar confirmed the bulk of motor-finance cost of sales consist of commissions:

[FY 2024] “Cost of sales were £961 in the latest year, for information about £700 of that is introduced commission, which is a variable cost that goes straight to the broker. Other costs of sales are consumer credit referencing and our data costs“

  • Since FY 2012, cost of sales per motor loan has ranged between 9% and 13% of the average loan advance:
  • Between 9% and 13% compares well to the 26% charged to Mr Johnson. Exclude non-commission cost of sales and Advantage’s proportion is probably between 7% and 10%. 
  • Assuming Advantage pays an average £900 commission per loan…
  • …and taking that aforementioned representative example of borrowing £8.0k at a flat 17% a year over 54 months leading to interest of £6.1k and paying a total sum of £14.6k that includes a £325 acceptance fee and a £200 vehicle-purchase fee…
  • …that £900 commission would equate to:
    • Approximately 6% of the £14.6k total repayable (versus 18% for Mr Johnson);
    • Approximately 15% of the £6.1k interest (versus 63% for Mr Johnson), and;
    • Approximately 14% of the £6.6k interest and fees (versus 55% for Mr Johnson).
  • Those estimated percentages do not seem too “unfair” against those suffered by Mr Johnson. 
  • Following this FY, SUS strongly suggested redress for “unfair” commissions could be minimal (see H1 2026 trading updates):

[RNS August 2025] “Advantage is in the fortunate position of avoiding any redress on DCA‐related deals, which it never offered. It is also in a very strong position to disprove any unfair relationship claims under the Consumer Credit Act or Consumer Duty, given the size and proportion of commissions paid relative to the total charge for credit, and its excellent customer relations.”

Advantage Finance: loan volumes and rates

  • The aforementioned “further upsurge in regulatory activity” caused the number of loans issued by Advantage during this FY to drop 41% to 12,703 — the lowest for an FY since FY 2015 (11,941).
  • After 8,752 loans were issued during H1, loans issued during H2 slumped 66% to only 3,951:
  • Given that Q1 loans were 5,153 and Q4 loans were 1,992…

“A cost-of-living forbearance review by the FCA in late 2023 placed new restrictions on affordability and led to a significant fall in loan approvals and then transactions. Thus, the beginning of 2024 saw 5,153 new deal transactions in the first quarter, whilst new deal transactions were only 1,992 in the fourth quarter.“

  • ….Q2 loans were therefore 3,599 and Q3 loans were therefore 1,959.
  • H2’s 3,951 new motor-finance loans were the lowest for any H1 or H2 since at least H1 2016.
  • This FY’s reduction to new motor-finance loans clearly started during April 2024, accelerated during August 2024 and lasted until December:
  • The reduction to new loans coincided with a “shift to lower risk, higher tier customers”:

“In addition, new regulatory interpretations led Advantage to an understandably but perhaps overly cautious approach to underwriting. In the apparent absence of a uniform approach to this throughout the industry, this led to some loss of credibility for Advantage with introducers. This credibility is now being restored and has prompted a shift to lower risk, higher tier customers who now comprise 70% of new deals compared to 48% a year ago.” 

  • Motor-finance customers are ranked into different tiers based on their likelihood to repay, with Tier A the most likely to repay and Tier E the least likely to repay.
  • From what I can tell, during February 2024:
    • Lowest-risk Tier A customers represented 28% of new borrowers, and;
    • Highest-risk Tier D/E customers represented 35% of new borrowers:
  • In contrast, during January 2025:
    • Lowest-risk Tier A customers represented 50% of new borrowers, and;
    • Highest-risk Tier D/E customers represented 12% of new borrowers.
  • Judging by the tier mixes of FYs 2023 and FY 2024…
  • …Tier A customers representing 50% of new borrowers is the largest proportion since at least FY 2022:
  • I am hopeful motor-finance competitors who are now:
    • Paying ‘fair’ commissions to car dealers; 
    • Hamstrung by significant redress liabilities, and/or;
    • Withdrawing from the motor-finance market completely…
  • …will allow Advantage to continue to capture a greater number of Tier A borrowers (see Valuation).
  • Lower-risk borrowers are charged lower interest rates than higher-risk borrowers and, emphasising the significant shift towards Tier A, this FY’s new customers were charged a 16.0% (flat per annum) average interest rate:
  • 16.0% compares to 16.9% charged during the comparable FY and is the lowest rate charged during an FY since at least FY 2012:
  • Note the preceding H1 reported an average 16.9% (flat per annum) average interest rate…
  • …which implies new borrowers during H2 may have been charged close to 15% to arrive at this FY’s 16.0% average.
  • The duration of the typical loan continues to extend. The 55 months for this FY compares to 54 for the comparable FY, 50 for FY 2017 and 44 for FY 2012.  
  • I speculate the lengthier repayment duration reflects the higher cost of used cars as customer budgets generally reach a c£275 per month repayment ceiling.
  • This FY’s average motor-loan advance increased by £451 to £8,609:
  • An average £8,609 loaned to 12,703 borrowers equates to a total £109m lent — down 38% of the comparable FY’s £176m (£8,158*21,656).
  • The £109m lent was split £73m during H1 and £36m during H2 — the latter diving 62% to register the lowest amount lent by Advantage during any H1 or H2 since at least H1 2018:
  • Lending £36m to 3,951 new customers during H2 equates to an average £9.2k average loan.
  • In fact, the shift towards Tier A customers increased the average advance during Q4 to almost £10k:
  • Although Advantage charges lower rates of interest to lower-risk customers, the amount of interest received could be higher due to lower-risk customers tending to borrow more than higher-risk customers. 
  • The 12,703 new loans issued during this FY were offset by 19,767 accounts closed due to completed repayments, voluntary terminations or the commencement of legal proceedings:
  • The account openings and closures left total ‘live’ accounts 7,064 lower at 59,638.

Advantage Finance: revenue and cost of sales 

  • Despite this FY’s average motor-loan advance increasing by £451, the average (flat per annum) loan rate reducing to 16.0% and account numbers sliding by 7,064 cut Advantage’s FY revenue by 6% to £91.8m:
  • After Advantage’s H1 revenue remarkably attained a new £49.1m H1 record, H2 revenue dived 16% to £42.7m — the lowest for any H1 or H2 since H2 2021 (£38.4m).
  • The weaker H2 revenue left H2 revenue per Advantage account at an annualised £1.36k — the lowest level since the pandemic-blighted FYs of 2021 and 2022: 
  • Cost of sales — which include broker commissions and data costs — jumped 15% to a record £1,107 per motor loan:
  • After the preceding H1 showed cost of sales per motor loan at £1,004 for 8.8k loans…
  • …H2 must have incurred cost of sales per motor loan beyond £1,300 to arrive at this FY’s £1,107 average for 12.7k loans.
  • Despite the greater cost of sales per loan, the lower number of loans issued meant Advantage’s total FY cost of sales dropped 32% to £14.1m:
  • In fact, the curtailed lending during H2 reduced H2 motor-finance cost of sales by 52% to only £5.3m…
  • …and Advantage’s cost of sales therefore absorbed only 12.3% of motor-finance revenue during H2 — the lowest for any H1 or H2 since at least H1 2015.

Advantage Finance: first payments

  • The shift towards Tier A customers at the end of this FY significantly improved Advantage’s first-payment experience (blue line, left axis):
  • The proportion of first payments made on time rebounded to 97.25% during January, and is the highest proportion since October 2023 and above the typical 96% first-payment minimum witnessed since late 2017.
  • The proportion of borrowers making their first payments on time has shown to correlate inversely to the proportion of loans that ultimately suffer losses (red line, right axis).
  • The first-payment chart highlights the cessation of Tier E lending during the pandemic that prompted a sudden improvement of first payments to 99%:
  • I trust the recent withdrawal from Tier E lending will continue and sustain the 97.25% first-payment proportion.
  • I speculate Advantage should remove Tier E products entirely to reduce the likelihood of suffering impairments following the introduction of the aforementioned BiFD and Consumer Duty regimes and the greater leeway now afforded to borrowers in arrears.

Advantage Finance: collections

  • Advantage’s collection rate was another casualty of this FY’s “upsurge of regulatory activity” and, in particular, the aforementioned section 166 process and associated repossession restrictions. 
  • This FY said collections of due payments reduced to 85% during Q4 versus a “historic 92%“:

“The second contributor to Advantage’s performance last year lay in the field of collections… Unfortunately, evolving regulatory interpretations at times gave precedence to often subjective feelings of customer well-being over their contractual obligations and ability to continue to access credit. This led to an understandable loss of focus in Advantage’s collections department, which was exacerbated by the imposition in 2023 of voluntary regulatory restrictions by the FCA which curtailed any repossession activity, and even the mention of it to customers in arrears. As a result, up to date gross receivables fell from 74% to 65% of the book last year and adherence to contracted repayments fell to 84% in the normally seasonally challenging final quarter, from a historic 92%”

  • Collections of due in fact touched 80% during December:
  • Collections of due looked to have averaged 85% during this FY.
  • For perspective, collections of due were 92.1% for the comparable FY, 93.6% for FY 2023, 93.2% for FY 2022, 83.3% for (pandemic-blighted) FY 2021 and 93.5% for FY 2020.
  • Collections of due averaging 85% is less than the 87% typically collected at Christmas:
  • Note that SUS’s charts show collections consistently below budget since the start of FY 2024.
  • The lifting of FCA restrictions alongside the shift towards Tier A borrowers have combined to improve Advantage’s collection rate further.
  • This FY said collections of due during the early months of FY 2026 had reached 91%:

“Fortunately, such oversteer is now being corrected as collection teams combine a refined approach to customer forbearance with more habitual forms of responsible collecting. Repayment adherence in February was back up to 88% and in March to 91% and average payment arrangements for customers in arrears have also now improved.“

  • Subsequent trading updates for H1 2026 indicated collections remaining close to 90% (see H1 2026 trading updates).
  • Given the faltering percentage of collections due, total FY cash collections unsurprisingly ran below budget:
  • Cash collections started to run below budget during H2 2024:
  • Advantage’s collections, settlements and recoveries for this FY amounted to £217m, down 4% on the comparable FY:
  • Collections, settlements and recoveries during this FY as a proportion of the gross loan book (i.e. before impairments) and the net loan book (i.e. after impairments) were approximately 50% and 70% respectively, and on a par with the pandemic lows of H1 2021:
  • Collections, settlements and recoveries equating to a smaller proportion of the loan book confirms Advantage’s borrowers — at least during this FY — had become more reluctant to repay what they owed.

Advantage Finance: future repayments

  • The comparable FY expected customers to eventually repay 127% of the motor loans advanced (and cost of sales paid) during that FY:
  • That 127% would be the lowest payback percentage since at least FY 2008 if the estimate proves accurate:
  • This FY expected customers to eventually repay 131% of the motor loans advanced (and cost of sales paid) during this FY:
  • The 127% expected for the comparable FY meanwhile remained unchanged.
  • Collecting 127% or 131% of the original loan (and cost of sales paid) is some way off the 150%-plus collected for money lent (and cost of sales paid) between FYs 2010 and 2014.
  • The 131% estimate for this FY could change significantly during the next few years. 
  • For example, SUS also estimated an initial 131% payback for motor loans issued during (pandemic-blighted) FY 2021… which has since been uplifted to 139%: 
  • I am hopeful SUS is once again ‘under-promising’ with this FY’s 131% payback estimate for an ‘over-delivery’ during the next few years.
  • Mind you, SUS estimated an initial 133% payback for motor loans issued during FY 2023… which has since been reduced to 125%.
  • And SUS estimated an initial 135% payback for motor loans issued during FY 2022… which has since been reduced to 132%.
  • I suspect shareholders may just have to accept motor loans issued during this FY — as well as during the preceding three FYs — will be more susceptible to non-payments than originally anticipated because of the aforementioned regulatory and legal upheavals.

Advantage Finance: up-to-date and overdue accounts

  • The slower rate of collections left only 64.5% of Advantage’s loans up to date:
  • The 64.5% compares to 69.3% for the preceding H1 and 74.0% for the comparable FY:
  • However, the up-to-date 64.5% exceeds the 60.5% (H1 2021) and 62.0% (FY 2021) recorded during the early stages of the pandemic.
  • During the pandemic, approximately 20,000 Advantage customers enjoyed FCA-authorised payment holidays that lasted up to six months.
  • SUS deemed the payment-holiday customers as ‘overdue’ even if normal repayments were resumed.
  • For extra perspective, the up-to-date customer proportion topped 80% during FYs 2017 and 2018, and reached a super 91% during FY 2016:
  • H1 2024 last disclosed the number of pandemic payment-holiday accounts (5,558), which should have all now disappeared from Advantage’s loan book:
  • I must confess I am not sure what to make of the average net loan outstanding (i.e. after impairments) at overdue accounts (£4.71k) creeping beyond the average at up-to-date accounts (£4.63k) during H2:
  • I think I would prefer the average up-to-date account to owe more than the average overdue account, as the former is more likely to repay the rest of the motor loan than the latter.
  • Mind you, the average overdue account did exceed the average up-to-date account at the end of FYs 2017, 2018, 2019 and 2021, so the situation is not completely unprecedented.

Advantage Finance: impairments

  • SUS’s loans are classified as either:
    • Stage 1, which reflects loans owed by up-to-date customers;
    • Stage 2, which reflects loans owed by customers with a “good payment record” but have been identified as “vulnerable” by factors such as “health, life events, resilience or capability that create a greater credit risk”, or;
    • Stage 3, which reflects loans owed by customers one month or more in arrears.
  • This FY disclosed motor-finance customers owing total gross loans of £402m, of which £118m were impaired (i.e. expected not to be repaid):
  • This FY’s low rate of collections unsurprisingly swelled the level of motor-finance loans deemed to be Stage 3.
  • At the end of this FY, the Stage 3 proportion of gross motor-finance loans (i.e. before impairments) owed was 42% versus 29% at the end of FY 2022:  
  • In contrast, the Stage 1 proportion of motor-finance loans owed has declined from 69% to 55% during the same three years.
  • This FY’s total loan-book impairment for Advantage increased by £13m to £118m:
  • Of the £171m lent to in-arrears Stage 3 Advantage borrowers and still to be repaid, SUS reckoned £102m or 60% would not be collected:
  • That 60% broadly matches the Stage 3 proportions reported for the comparable FY (58%) and FY 2023 (60%).
  • Of the £221m lent to up-to-date Stage 1 Advantage borrowers and still to be repaid, SUS reckoned £12m or 6% would not be collected.
  • The 6% is slightly less than the Stage 1 proportions reported for the comparable FY (7%) and FY 2023 (9%).
  • This FY’s greater proportion of Stage 3 borrowers meant the total £118m Advantage loan-book impairment was equivalent to 29% of the overall £402m lent originally and still outstanding:
  • The 29% proportion is the highest since FY 2012 (30%) and compares to 27% for the preceding H1, 24% for the comparable FY and FY 2023, and 26%-27% for the pandemic-blighted FYs 2021 and 2022.
  • For extra perspective, Advantage’s impairments ran at just 18% of total money lent during pre-pandemic FYs 2019 and 2020.
  • Lending a total £402m and impairing £118m means Advantage expects to receive 71p of capital back for every £1 loaned.
  • Charging the aforementioned 33.87% APR is therefore required to recoup the 29p of capital not repaid and still earn an adequate return on the overall £1 lent.
  • I am hopeful Advantage enhancing its rate of collections (see H1 2026 trading updates) can reduce that 29% proportion by limiting further impairments.
  • Reflecting this FY’s swelling of Stage 3 motor-finance loans, Advantage’s FY impairment charge climbed £10m to £33m and was split £18m for H1 and £15m for H2:
  • Advantage’s total loan-book impairment provides a sobering view of the subsidiary’s lending since the pandemic.
  • During the five years from FY 2020 to this FY, Advantage’s gross loan book (i.e. before impairments) gained £58m (to £402m) while the impairment provision gained £55m (to £118m):
  • In other words, of the extra £58m lent to Advantage borrowers that has still to be repaid, an enormous £55m is expected not to be collected.
  • For comparison, during the five years to FY 2020, Advantage’s gross loan book (i.e. before impairments) gained £216m (to £344m) while the impairment provision gained only £42m (to £63m):

Aspen Bridging: competitive position, loan volumes and rates

  • Established by SUS at the start of FY 2018, Aspen Bridging offers property-bridging loans for small property developers and investors. 
  • This FY reiterated the division’s attractions to borrowers:

“Mainstream” banks, including the newer “challengers”, continue to lack the speed, flexibility and appetite to furnish the smaller, short-term loans in which Aspen specialises. Recent consolidation and instability in the challenger banking sector is evidence of this and again shows that, technology, speed and a quality bespoke service – as well as price – are what give smaller entrants like Aspen their competitive edge.” 

  • The subsidiary’s progress is supported by conservative lending to low-risk “experienced” customers:

“Aspen values its security properties conservatively and keeps gross Loan to Values to an average 70% and the business now only considers experienced borrowers from the top three quality bands.“

  • The conservative lending is supported by “on-site visits and risk data management“:

“Our focus on delivering a fast, consistent and a reliable service for both new and returning customers coupled with our own on-site visits and risk data management USPs has enabled Aspen to successfully operate in this speciality lending market.“

  • Aspen offers only commercial loans, which are unregulated and therefore not subject to any FCA interference.
  • This FY encouragingly disclosed:
    • 35% of new loans were advanced to returning Aspen customers, and;
    • 16% of new loans were sourced direct from the borrower instead of through a broker.
  • This FY said Aspen’s performance was “excellent” and was supported by “improved volumes“: 

“Aspen achieved an excellent financial performance in a subdued housing market during the year ended 31 January 2025, driven by improved volumes, slightly improved interest margins and good repayment quality. The values of cost of sales and overheads also grew but were sensibly controlled relative to advances and to revenue, thus producing a gain in operational efficiency.”

  • The “improved volumes” for this FY amounted to a 16% increase to 191 new loans:
  • Of the 191 new loans, 93 were advanced an average £935k during H2 to give a £940k average advance for this FY.
  • The £940k average reflected the “experienced” borrowers and remains much higher than the average £618k or less (excluding CBILS) advanced to perhaps less experienced borrowers up to FY 2022.
  • This FY’s webinar claimed the £940k average was “broadly at the level for the average in the market“.
  • 191 borrowers receiving an average £940k equates to a total £180m gross advance — up 24% to set a new FY record:
  • The £180m gross advance was split £93m during H1 and £87m during H2:
  • Although the £87m lent during H2 was lower than both the £93m lent during H1 and the £88m lent during the comparable H2, Aspen’s lending following this FY has surged to a new record (see H1 2026 trading updates).
  • This FY’s £180m gross advance led to Aspen’s net loan book expanding by £22m, or 17%, to £152m:
  • This FY showed the LTV at a normal 71%:
  • This FY’s average blended yield was 1.07% per month, the highest since FY 2020 (1.12%) and suggests borrowers pay somewhat more than Aspen’s headline rates:
  • Indeed, Aspen’s latest product guide says developers borrowing against residential properties can pay a flat monthly interest rate of 0.78% on a 75% LTV arrangement. 
  • Not all of Aspen’s gross advances are received immediately by the borrower. Depending on the development work involved, some advances are paid in stages with Aspen retaining the balance.
  • Aspen’s FY net advances (i.e. after retentions) of £157m equalled collections of £157m:
  • For the comparable FY, Aspen’s net advances (i.e. after retentions) of £126m equalled collections of £126m.
  • Net advances equalling collections for two consecutive years does suggest Aspen has now become ‘self funding’ before overheads, interest and tax (see Financials: cash flow and debt).
  • Boosting FY property-finance collections were ‘repayments beyond term’, which at £42m were not insignificant versus the standard settlement repayments of £115m:
  • Regular ‘repayments beyond term’ emphasise not all of Aspen’s borrowers clear their loans on schedule. Such repayments have bolstered standard repayments by a total 35% since Aspen’s formation:

Aspen Bridging: impairments, revenue and cost of sales

  • Of the aggregate 872 loans advanced by Aspen since the subsidiary’s formation, 696 have been repaid and only 15 of the remaining 176 are “past due or in default” — versus 15 of 163 for the comparable FY.
  • The 15 defaulters are categorised as Stage 3 borrowers, and of the £14m lent to these in-arrears borrowers, SUS reckoned £1.9m or 14% would not be repaid:
  • The level of Aspen’s Stage 3 impairments can fluctuate. The 14% expected not to be repaid for this FY compares to 6% for the preceding H1, 13% for the comparable FY, 6% for FY 2023 and 14% for FY 2022.
  • But the Aspen borrowers moving to Stage 3 during this FY — or former borrowers that did not repay as much as expected — led to Aspen’s FY impairment charge against profit more than doubling from £923k to £2.4m.
  • Aspen’s Stage 1 borrowers do not appear to carry more risk of problems than before.
  • The comparable FY showed £122m Stage 1 loans with a tiny £914k impairment, while this FY showed Stage 1 loans up a further £20m to £141m but with impairments up only a further £87k to £1,001k. 
  • This FY implied the £14m lent originally to Stage 3 borrowers would be recouped if their properties were sold for their estimated £17m market value: 

“The estimated value of first charge secured properties held under our bridging loan facility agreements at 31.1.25 is £246.3m (2024: £199.6m). This includes £16.7m estimated value of properties secured which is held for loan agreements currently in Stage 3 (2024: £15.3m).“

  • The same text revealed the market value of all Aspen’s properties was £246m, which equates to a 62% loan-to-value given Aspen’s net loan book finished this FY at £152m.
  • Aspen’s enlarged loan book and the higher blended yield pushed FY revenue 38% higher to a new £23.8m record: 
  • H2 revenue gained 34% to £12.5m to set a new Aspen record for any H1 or H2.
  • Cost of sales (mostly broker fees) at a reported 1.1% of the average advance for this FY was the lowest since Aspen’s formation:
  • Aspen’s FY cost of sales were a welcome 10% of FY revenue (£2.3m/£23.8m) versus 12%-17% between FYs 2020 and 2024. The proportion in fact declined to 9% for H2 (£1.1m/£12.5m).
  • Despite this FY’s higher impairment, Aspen’s FY profit gained 50% to £7.2m:
  • Aspen H2’s profit rallied 58% to £3.8m to set a new record for any H1 or H2. 
  • This FY’s profit setback for Advantage meant Aspen’s profit represented a record 30% of SUS’s total profit:
  • Aspen’s FY net loan book meanwhile supported a record 35% of SUS’s entire lending:
  • This FY said Aspen’s prospects for FY 2026 were “very good“:

“[Aspen] enters the new financial year with 17% higher net receivables than a year ago and… continues to successfully develop its introducer network, products and staff qualifications and experience. Therefore, prospects for further Aspen growth in the growing property bridging market are very good.”

  • Sure enough, trading updates during June and August confirmed Aspen’s H1 2026 was indeed “very good” (see H1 2026 trading updates).
  • Aspen’s website revealed during 2024 the aim of taking cumulative property-finance lending from £500m to £1b “in the next few years“:

[Aspen March 2024] “Aspen Bridging has revamped its sales force – including two new appointments – as the company targets £1bn in total lending in the next few years.
…
“Jack Coombs, Managing Director at Aspen Bridging, said: “Recently we have made several key personnel decisions as we structure the business for £1bn in total lending, having recently hit the £500m mark.”

[propertyreporter.co.uk August 2025]
“Jack Coombs, managing director of Aspen Bridging (pictured), said, “The business is developing at an exponential rate, growing at 25% year-on-year. We have a strategy in place to ensure we continue to beat this mark, which is why I can confidently state we will hit £1 billion in the next year.”

  • This FY took cumulative Aspen lending to £681m, while lending a further £106m during H1 2026 has taken the cumulative to £787m (see H1 2026 trading updates).
  • Lending another £106m during H2 2026 and then another £106m during H1 2027 will get Aspen to £1b.

Boardroom

  • SUS is run by the Coombs family, and lead executives Anthony and Graham Coombs are grandsons of founder Clifford Coombs and have worked at the business since the mid-1970s:
  • The preceding H1 webinar revealed the Coombs family controls at least 52% of the shares (an £118m-plus aggregate investment) and it’s this “identity of interest between management and shareholders”…

“An over-arching factor in the success of our business over 86 years and through three family generations of management is our business philosophy. The identity of interest between management and shareholders, and consequent family ethos, has fused our ambition for growth with a conservative approach to both credit quality and funding.” 

  • …that has delivered illustrious dividend and NAV advances since 1987:
  • From what I can tell, Anthony and Graham Coombs act as ‘capital allocators’ within S&U. They effectively decide how much the group should borrow and, through intra-group transactions, how much of that borrowed capital should then be allocated to Advantage and Aspen.
  • This FY saw the Coombs executives understandably reduce capital allocated to Advantage and increase capital allocated to Aspen (see Financials: cash flow and debt).
  • Various appointments suggest the Coombs family prefers Aspen to Advantage.
  • Jack Coombs for instance is a main SUS board executive and an Aspen director. At 37 years old, Jack Coombs may well become the lead SUS/Coombs director when his 72-year-old cousins Anthony and Graham decide to retire.
  • Richard Coombs — son of Graham Coombs — joined Aspen during 2023.
  • I note SUS’s head office and Aspen are both located in Solihull while Advantage is based in Grimsby.
  • Similar to many other family-controlled companies, SUS’s board does not meet every corporate-governance best practice:
  • In particular, Anthony Coombs serves as executive chairman and has done so since 2008: 

“Under Provision 9 of the Code it is recommended that the Chairman should be independent on appointment and should not have previously served as Chief Executive of the Company and under Provision 19 of the Code it is recommended that the Chairman should not remain in post beyond nine years from the date of their first appointment to the Board. 

Mr. Anthony Coombs was appointed Chairman in 2008 as part of an established succession plan reflecting the Coombs family’s significant holding in S&U, the identity of interest between management and shareholders and the consequent success of the Company. As explained above this has been (and is perceived by the investing community) as a significant strength in the responsible, long-term strategic approach to S&U’s development.“

  • Accompanying the three Coombs directors on the board are:
    • Aspen’s chief executive, and;
    • Four non-executives.
  • Aspen’s chief exec seems a useful employee. He was a “founding director” of Vanquis Bank, joined SUS during 2014 as “strategic development director” and led the launch of Aspen in 2017.
  • This FY admitted two of the four non-execs had now served on the board for longer than the best practice nine years:

“Graham Pedersen was appointed to the Board in February 2015 and brings a wealth of experience to the S&U Board both as a regulator and a banker. He has therefore served as a non-executive director on the Board for over nine years. Notwithstanding this length of service, the Board considers him to be independent due to his robust judgement and character and the invaluable balance and experience he has brought to the Board’s deliberations. 

Tarek Khlat, a Banker, FCA Approved Person and Wealth Manager of great experience was appointed to the Board in March 2016. He has also therefore served as a non-executive director on the Board for over nine years. Notwithstanding this length of service, the Board considers him to be independent due to his robust judgement and character and the invaluable balance and experience he has brought to the Board’s deliberations.“

  • SUS recently appointed a new finance director, who will join the board “following a settling in period“:

“Chris Freckelton is to join the group as CFO. Chris is a senior auditor at Deloitte and has great experience of the motor and specialist finance industries. We look forward to welcoming Chris at the beginning of April. It is intended that following a settling in period, Chris will be invited to join the S&U Board.“

  • One person yet to join SUS’s board is Karl Werner, who became Advantage’s boss on the first day of this FY:

[FY 2024] “[SUS has] great pleasure in welcoming Karl Werner as the new Chief Executive of Advantage. Karl has impressed enormously in the few months he has been with us, and his long experience of the finance industry and its regulation, particularly at MotoNovo and Aldermore Bank will make him a distinguished successor to Graham Wheeler.”

  • Note that Mr Werner’s predecessor became Advantage’s boss on 01 October 2019 and joined SUS’s main board exactly one year later. Mr Werner’s Advantage leadership now extends to 19 months without a board seat.
  • Still, the Coombs leadership may hold Mr Werner in high regard. During this FY, the highest paid director at Advantage — presumably Mr Werner — was paid more than £500k:
  • In contrast, the main board executives were each paid less than £500k:
  • The most appealing features of SUS’s board remuneration are the modest bonuses (just £80k for this FY) and lack of a dilutive LTIP.

Financials: cash flow and debt

  • The contrasting lending activities of Advantage and Aspen during this FY were reflected by their respective cash movements.
  • Advantage lending the aforementioned £109m and collecting the aforementioned £217m left £108m to fund divisional expenses of £46m and divisional dividends of £15m that created a £47m divisional surplus:
  • Aspen meanwhile required an extra £18m after lending the aforementioned net £157m, collecting the aforementioned £157m, incurring costs of £16m and paying a £2m divisional dividend. 
  • Advantage generating a £47m surplus while Aspen required an extra £18m emphasises which division SUS preferred to receive extra capital:
  • Indeed, since Aspen was established at the start of FY 2018, Aspen has received funding of £138m while this FY’s £47m surplus means Advantage during the same time has on aggregate received no further funding. 
  • The dividends paid by Advantage and Aspen to the parent company do not always tally exactly with the dividends paid to SUS shareholders:
  • During this FY, aggregate dividends paid by Advantage and Aspen were £2.9m greater than the aggregate paid by SUS to shareholders:
  • The Coombs ‘capital allocators’ therefore seemingly preferred to repay debt than maintain the shareholder payout. That £2.9m difference equates to 24p per share versus the 20p per share reduction to the FY dividend.
  • This FY’s £47m Advantage surplus effectively funded the extra £18m required by Aspen, which left £29m to reduce debt to £198m.
  • Debt at £198m does not appear excessive relative to the £436m lent to customers (after impairments):
  • Bank interest paid during this FY was £18m, implying SUS’s average £211m FY borrowings incurred interest at approximately 8.5%. 
  • This FY confirmed an 8% borrowing rate:

“The average effective interest rate on financial assets of the Group at 31 January 2025 was estimated to be 23% (2024: 26%). The average effective interest rate of financial liabilities of the Group at 31 January 2025 was estimated to be 8% (2024: 8%).“

  • H2 interest was approximately £8m, implying SUS’s average £219m H2 borrowings incurred interest at 7.7%. 
  • For perspective, borrowings incurred interest at 7.1% during the comparable FY, 4.8% during FY 2023 and 3.4% during FY 2022.
  • SUS still does not disclose the exact rates payable on its debt facilities, which is very poor form for a main-market company:
  • I trust the new finance director will soon improve the group’s borrowing disclosure.
  • Trading updates following this FY revealed borrowings reducing further to £185m…but also gave upbeat debt commentary in light of the Supreme Court judgment (see H1 2026 trading updates).
  • Interest payable by all customers (both Advantage and Aspen) is fixed throughout their agreements, and therefore the higher interest incurred by SUS has diminished the returns earned on the money the group has already lent…
  • …particularly at Advantage, where loan terms now last for 55 months.
  • The 8% incurred by SUS compares to an estimated 23% average charged to all borrowers during this FY:

“The average effective interest rate on financial assets of the Group at 31 January 2025 was estimated to be 23% (2024: 26%). The average effective interest rate of financial liabilities of the Group at 31 January 2025 was estimated to be 8% (2024: 8%). The average effective interest rate on financial liabilities of the Company at 31 January 2025 was estimated to be 8% (2024: 8%). 

  • The average rate SUS has charged to all borrowers has decreased over time as the lower-rate Aspen loans have become a larger part of the group:
  • The difference between the overall interest rate earned from SUS’s customers and that paid to SUS’s lenders was 15% for this FY — the lowest net interest margin since at least FY 2008. 

Financials: returns on capital and equity

  • SUS’s debt is held within the parent company and then ‘re-lent’ to Advantage and Aspen as necessary:
  • This FY implied Advantage and Aspen owed the parent company a combined £270m, which effectively comprised the £198m bank debt plus a further £73m intra-group liability.
  • The sums owed to the parent company — plus minor other subsidiary liabilities — enhances divisional returns on equity very significantly.
  • For example, a simple pre-tax return on average assets (i.e. customer loans) for this FY gives:
    • £17m/£311m = 5% for Advantage, and;
    • £7m/£143m = 5% for Aspen:
  • But a simple pre-tax return on average equity (i.e. customer loans less liabilities) for this FY gives:
    • £17m/£152m = 11% for Advantage, and;
    • £7m/£11m = 65%(!) for Aspen:
  • Advantage and Aspen appear to operate successfully with gearing greater than the group accounts suggest.
  • Indeed, Companies House shows Advantage’s NAV advancing from £105m to £151m during the last five years…
  • …with cumulative dividends paid to the parent company of £68m during the same time:
  • Advantage creating an additional £114m (i.e. £46m extra NAV and dividends of £68m) over five years from a starting equity base of £105m is extremely impressive, especially as the subsidiary’s expansion during those five years ended with no extra funding via the parent company. 
  • Companies House meanwhile shows Aspen’s NAV increasing from £1.4m to £12.9m during the last five years, with cumulative dividends paid to the parent company of £4.6m:
  • Aspen’s £16.1m of extra NAV and dividends (i.e £11.5m extra NAV and dividends of £4.6m) was created through additional debt funding of £119m from the parent company.
  • Aspen’s return on capital for that five-year period is therefore arguably £16.1m/£119m = 13.5%. 
  • But Aspen’s return on equity is off the scale — a starting £1.4m equity base generated an additional £16.1m of extra NAV and dividends over five years without any extra equity funding.
  • Advantage ought to enjoy lucrative ROCEs when customers repay their loans in full and on time.
  • Charging a flat 16.0% annual interest on a £8.5k loan over 55 months less cost of sales of £1,107 generates an approximate £5.2k return.
  • Earning £5.2k from an £8.5k investment over 55 months equates to a 60% gain or approximately 13% a year. 
  • Note that Advantage customers repay a mix of loan capital and interest during the terms of their loans.
  • That c13% return could therefore be approximately 26% assuming the loan capital is repaid equally throughout the term.
  • The same calculations for the ten years before this FY are within a consistent — and appealing — 28% to 31% range. 
  • Of course not every Advantage loan is repaid in full and on time. 
  • 29% of the £402m Advantage lent originally (and still outstanding) has been impaired as a bad debt.
  • Reducing my estimated 26% Advantage return for the 29% divisional write-offs still gives a 19% return, which remains very healthy and still leaves good room for a greater proportion of non- or part-paying motor-finance borrowers.
  • Aspen does not seem to enjoy as lucrative ROCEs as Advantage when customers repay their loans in full and on time.
  • Charging a flat 1.07% monthly interest on a £940k loan over 11 months (£111k) less cost of sales of 1.1% (£10k) generates an approximate £101k return.
  • Earning £101k from an £940k investment over 11 months equates to only an 11% gain or approximately 12% annualised. 
  • However, the aforementioned minimal impairments for Aspen’s loans indicate the division’s borrowers are much more likely to repay their loans in full — albeit sometimes through repossession. 
  • The minimal impairments allows Aspen to operate with much higher levels of gearing.
  • Indeed, Aspen’s liabilities represent 92% of its assets versus only 47% at Advantage:
  • As noted above, Aspen’s average NAV of only £11m during this FY allowed the division to earn a pre-tax return on average equity of 65%.
  • From a group perspective, between FY 2020 and this FY, SUS has created additional NAV of £59m and paid cumulative dividends of £71m. Creating an additional £130m for shareholders from a starting equity base of £179m is very respectable given the pandemic, regulatory and legal disruption suffered by Advantage…
  • …and is equivalent to a compound 11.5% total NAV/dividend CAGR:
  • Take the five years from FY 2016 to FY 2021, and SUS created additional NAV of £53m and paid cumulative dividends of £62m from a starting equity base of £128m leading to a useful 13.6% total NAV/dividend CAGR:
  • Return on equity calculations before FY 2016 are distorted significantly by SUS’s home-credit business, which was sold that year for £82m.

Financials: employees

  • SUS’s employee statistics underline the different progress at Advantage and Aspen.
  • Despite this FY’s reduced number of motor-finance accounts, Advantage’s workforce increased by seven to 212 and now administer an average 298 accounts each versus almost 400 a few years ago:
  • Outstanding motor loans per Advantage employee have meanwhile stagnated since FY 2018:
  • This FY recapped a number of initiatives to enhance Advantage’s workforce productivity, including a new telephony system, a new customer website and a further office building:
  • I speculate Advantage’s workforce productivity has been hampered over time by additional staff being required to ensure compliance with extra regulatory requirements.
  • I also speculate extra staff have been needed to cover for colleagues away on courses. This FY claimed Advantage’s staff completed more than 1,400 training sessions:

“During the year Advantage implemented a Training & Competence Framework, which sets out how employees are trained and measured within their roles, and monthly reviews take place to assess competency for all staff within these departments. Over 1400 individual training courses were completed by staff over the year, these include internally developed training and a wide range of externally provided through FLA, FCA, MBL Seminars, ACAS, .Net and SAF for example. Many more hours of Continued Professional Development were recorded by our employees which demonstrates their commitment to keeping their skills and knowledge up to date and relevant.“

  • At least Advantage has kept a lid on employee costs. 
  • Companies House shows this FY’s cost per Advantage employee £2k lower at £45k:
  • Aside from FYs 2019 and 2021, the cost per Advantage employee has been kept commendably within the tight £44k-£47k range since FY 2016. 
  • In contrast to Advantage, workforce productivity at Aspen has consistently improved.
  • Aspen increased its headcount by two to 25 during this FY, and loans per Aspen employee are now close to £6m and revenue per employee is now close to £1m:
  • Companies House shows the cost per Aspen employee at £67k and within the £66k-£71k range witnessed since FY 2021.
  • This FY’s employee-cost control occurred despite the wider workforce apparently enjoying a 10% pay lift:

“For the year ended 31 January 2025 [executive director] salary increases were in the range 1.7% to 3.6% except where exceptional circumstances merited a higher increase. This was below the average increases given to the wider workforce which averaged 10.0% in a difficult inflationary cost of living environment for our employees.“

  • The wider workforce looks set to enjoy another 10% pay lift for FY 2026:

“The Remuneration Committee has now agreed [executive director]  salary increases for the year ended 31 January 2026 with 3 executive directors receiving no increase and the 2 key executives driving Aspen’s excellent performance receiving exceptional higher increases, as noted below. This is below the average increases given to the wider workforce which averaged 10.0% in light of the continued difficult albeit easing inflationary cost of living environment for our employees.“

  • Total FY employee costs increased by only 1% to £13.1m and continue to absorb 11% of revenue: 

H1 2026 trading updates

  • Trading updates published during June and August covering H1 2026 reflected the cessation of FCA restrictions at Advantage and reported further growth at Aspen.
  • June’s RNS revealed the following Q1 2026 Advantage progress:
    • Lending volumes up 50% versus Q1 2025;
    • The net loan book down £11m since this FY to an “above budget” £273m;
    • Collections of due at 89.4% versus approximately 85% for this FY;
    • The number of “longer-term nonpayers” cut by 35% since this FY, and;
    • Profit “almost on budget” and “on course to move ahead by half year“.
  • August’s RNS then revealed the following H1 2026 Advantage progress:
    • Advances recovering to “exceed budget” at £71m (versus £73m for H1 2025 and the lowly £36m for H2 2025), and;
    • Collections of due at “nearly 90%“.
  • June’s RNS revealed the following Q1 2026 Aspen progress:
    • Advances up 16% versus Q1 2025;
    • New agreements up 46% versus Q1 2025;
    • Repayments up a “remarkable” £19m to £57m versus Q1 2025;
    • The net loan book remaining at £152m since this FY, and;
    • Profit up 33% versus Q1 2025.
  • August’s RNS then revealed the following H1 2026 Aspen progress:
    • Advances up 15% to £106m versus H1 2025, and;
    • Collections up 49% to £109m versus H1 2025.
  • Possibly the most encouraging point from the H1 2026 RNSs concerned SUS’s renewed appetite for borrowings:

[RNS August 2025] “Whilst borrowings at half‐year were around £185m against current funding facilities of £280m, the recent revival in growth in both businesses is forecast to generate funding requirements exceeding these within the next two years.“

  • Debt peaked at £239m at the end of the preceding H1, finished this FY at £198m and finished the subsequent H1 2026 at £185m.
  • But SUS becoming willing to lift debt beyond the present £280m facilities limit could signal notable NAV potential.
  • For example, borrowings advanced by £99m between FY 2021 and this FY, during which time the total net loan book increased by £155m to enhance NAV by approximately £57m — equivalent to approximately £4.70 per share.
  • Debt rising another £99m from £185m to beyond £280m could therefore lead to a further £155m loan-book increase and £57m NAV improvement.
  • The H1 2026 RNSs strongly suggested “minimal” redress following the Supreme Court judgment:

[RNS August 2025] “[Advantage] is also in a very strong position to disprove any unfair relationship claims under the Consumer Credit Act or Consumer Duty, given the size and proportion of commissions paid relative to the total charge for credit, and its excellent customer relations.

Advantage reiterates that it has never used discretionary commission arrangements and feels very confident that its longstanding quality of customer service will mean that any unfair relationships found would be minimal.”

  • The general outlook from the H1 2026 RNSs were optimistic:

[RNS August 2025] “Favourable trends have continued and even accelerated...
…
“The expected resurgence in profitability for the Group is beginning to materialise and is expected to gain momentum in the second half of the year.”
…
“The skies are now brighter for a return to steady sustainable growth than at any time since the pandemic.”

Valuation

  • The favourable Supreme Court judgment has narrowed the gap between SUS’s share price and its NAV:
(Source: ShareScope)
  • And yet with “minimal” exposure to regulatory redress and an “expected resurgence in profitability”, the shares continue to trade below book value.
  • The £18.60 shares are priced at 0.95x this FY’s £19.59 NAV per share.
  • The ShareScope chart above shows the shares trading at or below NAV only occasionally during the last 30 years.
  • Buying at NAV (or below) should (in theory) deliver returns equivalent to lending direct to SUS’s customers — with NAV supported by the right to repossess the secured vehicles/properties if the loans default.
  • Advantage should now be relatively well placed versus rival lenders hampered by redress claims for DCAs and “unfair” commissions. 
  • Quoted rival Secure Trust Bank (STB) has even decided to exit motor finance completely:

[Secure Trust Bank July 2025]
“The Group announces it will stop new lending within its Vehicle Finance business and put the existing book into run-off.  This decision reflects the historical financial performance and medium-term outlook of the Vehicle Finance business, both on an absolute basis and relative to other parts of the Group, and its sub-scale nature.”

  • Other motor-finance lenders may still be engaging with a Skilled Person and a section 166 notice to implement BiFD and Consumer Duty correctly.
  • This FY noted a “level competitive playing field” should now emerge within the motor-finance sector:

“Industry-wide regulatory engagement provides a level competitive playing field with Advantage well positioned to succeed“

  • I trust Advantage will now be able to convert more of its application approvals into actual loans now that broker intermediaries and car dealers will no longer be influenced by DCAs or “unfair” commissions.
  • Perhaps the next few years will mirror the few years following the 2008 banking crash, during which lending competition reduced and various measures of Advantage’s profitability improved until rivals re-emerged from 2015 onwards:
  • Assuming reasonably favourable trading conditions for Advantage and Aspen, I suspect SUS can at least repeat the last five years during the next five years and deliver a compound 11.5% total NAV/dividend CAGR:
  • Perhaps if the shares return to trading above book — the premium to book has at times reached 2x…
(Source: ShareScope)
  • …then the total share-price/dividend return could easily surpass a 10% CAGR.
  • For example, assuming over the next five years:
    • NAV grows at 6.5% per annum to almost £27 per share;
    • The FY dividend stays at 100p per share, and;
    • The shares re-rate to 1.2x NAV…
  • …the shares would trade at more than £32 and with £5 total dividends collected on the way, could make a near-15% five-year CAGR from the recent £18.60.
(Source: ShareScope)
  • As SUS’s “expected resurgence in profitability” is awaited, this FY’s 100p per share payout presently supports a 5.4% income.

Maynard Paton

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